Euro Disney said Monday that it has agreed to a funding deal worth 1 billion euros ($1.25 billion) from American parent The Walt Disney Company, including a share sale and a debt restructuring. The move is expected to allow Disney's struggling European arm to reduce debt and invest more in the region.
California-based Walt Disney owns 40 percent of Euro Disney, the company's theme park and entertainment resort near Paris, while another 10 percent is held by Saudi prince Alwaleed bin Talal. The deal will require Walt Disney to launch a tender offer on Euro Disney shares. Two years ago, Disney's European arm, which has struggled through the economic downturn, received 1.33 billion euros from its parent to restructure debt.
"Disneyland Paris is Europe's number one tourist destination, but the ongoing economic challenges in Europe and our debt burden have significantly decreased operating revenues and liquidity," Tom Wolber, president of Euro Disney, said according to Reuters.
The plan includes a rights issue of 420 million euros that will be open to all and will be backed by Walt Disney. In addition, about 600 million euros of the group's debt will be transformed into equity. Euro Disney, which has seen 275 million visitors since its opening in 1992, has been challenged by a fall in visitors' numbers of late, and has racked up debt worth 1.75 billion euros.
“This recapitalization is essential to reinforce the financial solidity of Euro Disney and allow the group to continue investing in its park,” Wolber said in a statement, according to Bloomberg, adding: “A bad economic environment and heavy debt have impacted revenue and cash.”
It is unclear if the Saudi prince will subscribe to the capital increase, but according to Reuters, the move could help Euro Disney earn nearly 250 million euros.
"I spoke to the Prince this morning, he welcomed the transaction but he hasn't yet taken a stand on which way he wants to go, he'll be coming back to us in about a week's time," Mark Stead, Euro Disney's finance director, said, according to Reuters.
The shares of Euro Disney fell almost 20 percent on Monday, the most in six years, following the announcement.